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SEPTEMBER 27, 1999 VOL. 154 NO. 12

HAINAN: Corruption Erupts in the South, 1984
Hot Stuff

People on Hainan Island joke that even the scraggly palm trees are on the lookout for a quick buck. After all, why else would they bother to take root in China's dusty, southernmost province instead of moving to lusher climates?

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presented by CNN, TIME, Asiaweek and Fortune

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The success of the Communist revolution climaxed a century-long drive by the Chinese to reclaim their historical greatness

Fast money does practically grow on trees in Hainan, as Beijing cadres found out in 1984. That year, the tropical backwater was given permission to import foreign vehicles. The vans were to be used by local cadres to tool around the island's state-run plantations. But they found a more lucrative use for the vehicles: reselling them to mainland provinces then banned from importing overseas goods. In the first half of 1984, 2,300 vans were approved for shipment. By September, the number had ballooned to 89,000. Most made their way north. The scheme depended not only on illicit signatures from local functionaries but also on pliant customs officers who ignored the suspiciously large shipments passing through Hainan's ports.

Punishment was swift when Beijing realized $1 billion in foreign reserves had been wasted to fund the profiteering plot. Top cadres were demoted, and China's leaders maligned the Hainanese as unprincipled bumpkins--even when some of the cars mysteriously ended up in Beijing. Yet graft was hardly unique to Hainan. Poorly paid officials throughout China pined for TVs, VCRs, karaoke machines. In 1988, 55,180 graft cases were prosecuted. A decade later, 124,000 cadres were found guilty of corruption: one of them, ex-Beijing party boss Chen Xitong, was sentenced to 16 years in jail for embezzling $2.2 billion from state coffers.

That the Chen scandal finally exposed Beijing's decayed heart was of no consolation to the Hainanese, who felt unfairly singled out in 1984. Although some islanders have made a fortune, Hainan as a whole has languished. Today, the shells of unfinished skyscrapers punctuate the skyline of the provincial capital, Haikou. Inside, the buildings are a moldy tangle of cables and pipes. Says a local official, surveying the half-built landscape: "Beijing destroyed Hainan's momentum for development." Not even the palm trees, planted astride the wide boulevards to ornament the city, can make up for Hainan's empty buildings and shattered reputation.

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